Want a great savings rate? It’s time to “notice” these accounts…

Over the last few years, savings rates have been on a
general downward trend. You’ve probably noticed this first-hand, and it could
be having a dramatic impact on the level of interest you receive from your
hard-earned savings pot. Well, we have a bit of good news for you – despite the
majority of average rates falling or remaining static in the last month, rates
on notice accounts have bucked the trend and are actually increasing!

Notice account rates
at two-year high

Figures from Moneyfacts show that the average notice account
rate has risen for the third consecutive month, and it’s managed to reach a
two-year high! It now stands at 0.81%, up 0.02% from May’s figure of 0.79%,
marking the highest level recorded since June 2013.

Happily, this sector of the market has seen gradual
improvement for much of the last year – it may be the only one that has, but
anything is better than nothing! Notice accounts could be perfect for those who
don’t mind a bit of active management when it comes to their savings, as all
withdrawals have to be planned in advance.

Unlike with an easy access account, you can’t just withdraw
your cash on a whim – some notice accounts permit earlier access, but this generally
comes with an interest penalty – which makes notice versions suitable for those
who need that kind of restriction to keep their savings pot intact. They
shouldn’t be used for an emergency fund, but if you’re saving for something
specific and don’t mind a few restrictions, you could benefit from far better
rates.

Even the average rate is just that, an average, and you
could get far better deals if you take the time to shop around (up to 1.91%!).
Happily, these rates seem to be rising on a regular basis, but why the
improvement? Well, analysis suggests that much of it could be due to the growth in challenger banks,
with many of these newer brands having a key presence in the notice account
sector.

Give challengers a
try

Challenger banks – and by that we mean newer banks that
aren’t big names and perhaps don’t have a high street presence – have come to
dominate our best buy charts, and they have a particular focus on this sector
of the market. Several of these fledgling brands have launched new products or increased
rates in recent weeks: GE Capital Direct and Secure Trust Bank have both
launched 120-day notice accounts in the last month, while Hampshire Trust Bank
increased the rate on its 90-day notice version to secure the top rate for its
term.

If you’re not familiar with these names, don’t worry – many
people aren’t! But, that doesn’t mean you shouldn’t consider them. They
typically offer far better rates than their high street counterparts, so if
you’re sticking with your bank out of loyalty, it could be time for a change.

Our analysis shows that many of the biggest high street
banks – think Barclays, Halifax, HSBC, Lloyds Bank, Nationwide, NatWest, RBS
and Santander – offer pitifully low savings rates, all because there’s a lack
of motivation for them to compete. Arguably, this could be the result of the
Funding for Lending Scheme, launched in 2012 to offer banks access to cheap
funding that they could lend out, which meant they had no need for savers’ cash
to boost their funding reserves.

As a result, savings rates fell – and they fell quickly. However,
challenger banks didn't take part in the scheme. Many weren’t even around when it
was launched, so they still need to rely on customer deposits to balance the
books. It’s therefore unsurprising that they’re actively competing and are
offering much higher rates.

Top picks

Want to check out the top accounts on the market? Here are
just a few you may want to consider – and all of them come from lesser-known
names. Give them a try!